Stocks Fall, but Narrow the Gap on Early Losses
Wall Street closed lower in profit taking Tuesday after the previous session’s big gain, though the market held on reasonably well despite a surprising drop in consumer confidence and a disappointing forecast from Texas Instruments.
The major indexes were down for much of the day, then recovered most of their losses in late trading. Still, the market’s give and take reflected the unknowns facing investors.
Wall Street remained gratified by the nomination of Bush administration economist Ben Bernanke to succeed Alan Greenspan as head of the Federal Reserve Board, but also continued to worry about inflation in the face of slow economic growth and warnings of declining fourth-quarter sales or profits from major companies like Texas Instruments.
Stocks were further pressured as the Conference Board reported that its consumer confidence index fell to 85 in October, down from 86.6 in September and less than the 88 reading economists had expected. The unexpected drop raised new concerns about consumer spending just a month before the start of the holiday shopping season.
“We’re in a market that is clearly in a little short-term decision box,” said Rod Smyth, chief investment strategist at Wachovia Securities. “It’s the debate whether core inflation remains low, which allows the Fed to stop raising rates, or whether core inflation is not able to be contained. We’ll get a progression of data and numbers that will help resolve this somewhat, but until then, we’re in the box.”
The Dow fell 7.13 points, or 0.07%, to 10,377.87, having lost more than 68 points earlier in the session. The Dow shot up 169 points on Monday.
Broader stock indicators were modestly lower. The Standard & Poor’s 500 index dropped 2.84 points, or 0.24%, to 1,196.54, and the Nasdaq composite index lost 6.38 points, or 0.3%, to 2,109.45.
Two stocks fell for every one that rose on the New York Stock Exchange.
Bond yields rose on expectations the Federal Reserve will keep raising interest rates to slow the economy, in particular the housing market. The benchmark 10-year U.S. Treasury note rose to 4.53%, from 4.45% on Monday.
Oil prices rebounded sharply after losing ground in the previous trading session, adding to investors’ worries. A barrel of light crude settled at $62.44, up $2.12, in New York trading.
In other economic news, existing-home sales for September, reported by the National Assn. of Realtors, were steady at an annualized rate of 7.28 million homes, slightly higher than expected. However, the increase was due to higher demand for new homes among refugees from Hurricane Katrina; without that demand, sales would have fallen.
Although third-quarter earnings from Texas Instruments rose 12% from a year earlier, the company’s revenue forecasts for the fourth quarter were weaker than expected. That led Bear Stearns analysts to downgrade the company’s stock. Texas Instruments dropped $2.37, or 7.7%, to $28.55.
“Obviously, with the Nasdaq leading losses, Texas Instruments’ problems are bleeding through to the rest of the tape,” said Brian Williamson, an equity trader at Boston Co. Asset Management. “It was just enough negativity to push us over the edge and fuel some of this profit taking we’re seeing here.”
In other market highlights:
* A gauge of companies that sell mainly to consumers had the steepest drop among the S&P; 500’s 10 groups, falling 0.8%. RadioShack, the third-largest U.S. electronics chain, retreated 74 cents to $22.28.
* Internet auctioneer EBay slid $1.41 to $38.01. Google is testing a service that may let users sell products online, posing a threat to EBay. Google, the world’s most-used Internet search engine, slipped $1.74 to $346.91.
* Sherwin-Williams slid $4.08, or 9.1%, to $40.75. The largest U.S. paint retailer cut its 2005 earnings forecast to as much as $3.23 a share, down from a July estimate of as much as $3.30.
* DuPont rose $1.18, or 3%, to $40.80 for the biggest advance in the Dow average. The chemical maker plans to buy back $3 billion of stock from Goldman Sachs Group on Oct. 27 and repurchase $2 billion more starting next year. DuPont also reported third-quarter profit that exceeded estimates.
* Coventry Health Care tumbled $7.57, or 13%, to $52.59 for the steepest slide in the S&P; 500. The healthcare management company said 2006 per-share profit, excluding some costs, would be $3.54 to $3.59. Analysts expected $3.65, on average, according to Thomson Financial.
The forecast helped send the Morgan Stanley Health Care Payer index down 4.3%, its biggest retreat since July.
* Research in Motion, the maker of the BlackBerry e-mail device, lost $2.71 to $57.40. Citigroup Investment Research analyst Daryl Armstrong, citing uncertainty about the company’s legal battle with patent-licensing firm NTP Inc., lowered his rating to “hold” from “buy.”
* PortalPlayer slumped $7.71 to $20.15. The supplier of components for Apple Computer’s iPod digital-music players expects fourth-quarter earnings of 34 cents to 43 cents a share and said it planned to sell 4.5 million new shares. Analysts on average expected the company to earn 43 cents. Apple lost 69 cents to $56.10.
* Earnings at International Paper rose sharply in the third quarter on proceeds from the sale of an Australian forest products company and a tax settlement. Despite materials and energy costs, the company surpassed analysts’ earnings expectations by 9 cents a share. International Paper nonetheless lost 37 cents to $28.
* Cablevision Systems tumbled $3.54, or 13%, to $24.26 after the Dolan family, the company’s majority shareholders, withdrew a plan to take the cable operator private. The family has recommended that Cablevision’s board issue a $3-billion special dividend to shareholders instead.
